The Underground Economy: Regenerative Farming’s Hidden Economic, Ecological, and Social Value

Abstract

The world’s agriculture is dominated by industrial agricultural practices that rely heavily on fossil fuels and chemical inputs. As a result, agriculture is responsible for a hefty 23-37% of the world’s greenhouse gas emissions and other negative impacts on global ecosystems (Foley et al., 2011; Springmann et al., 2018; IPCC, 2019). In contrast, regenerative farming (RF) practices grow food in addition to increasing the ecosystem services of farmland: sequestering carbon, boosting biodiversity, and a full suite of environmental benefits (FAO, 2019). Thus, agriculture can continue as a destructive enterprise or become a powerful solution to the climate crisis. Despite its clear benefits, regenerative farming is at a disadvantage in our current economic model because its full environmental and social value is not measured or incentivized. This thesis research measured the degree to which regenerative farming benefits are valued in markets by answering the following: What is the economic, environmental, and social value of a hypothetical 300 acre Wisconsin farm using industrial agricultural practices versus regenerative farming practices? What is the total value of the farm using an expanded accounting framework that includes environmental and social metrics, over 15 years? The hypothesis presented is that the total value of a regenerative farm will prove to be more valuable than an industrial farm by 25% over 15 years.

Consistent with the hypothesis, the industrially-farmed grain enterprise proved more profitable in a partial-budget analysis (USD1,243,792) than regeneratively-farmed pasture-raised beef (USD1,003,617) over 15 years with a 3% discount rate (DR). Thus, industrial farming proved more profitable than regenerative farming in today’s economic market using 2021 cash value, even when the most lucrative U.S. agricultural enterprises of grain and beef were compared.

However, when true cost accounting was used to measure the economic, environmental, social, and human value of an industrial grain farm (which used synthetic fertilizers, pesticides, monocrops, etc.) compared to a regeneratively grazed beef ranch (no synthetic fertilizers or pesticides, grows perennial pasture with grazing animals) the results were a dramatic 168% difference in value. The industrial grain farm’s value declined from USD1.2M to USD937,023 over 15 years (NPV of USD745,813 with a 3% DR) while the regeneratively grazed beef farm’s value increased from USD1M to ~USD2.2M (NPV~USD1.8M at 3% DR) when economic, environmental, and social values were included with their true costs. There is a ~USD1.6M net difference (136% increase) in environmental and social benefits over 15 years that are not seen or valued in the market when a 300-acre farm in Wisconsin converts from industrial to regenerative farming practices. Using available metrics, this analysis revealed regenerative farming’s value is invisible on a traditional accounting framework and there are staggering costs when environment, society, and individual citizens are not accounted for.